The Anatomy of the Perfect Stablecoin: Trust, Liquidity, and Global Utility

Transcript

Everyone, uh thank you for joining. Uh today I'm going to talk about uh stablecoins, which feels like such a 2025 topic with everything that's going on in crypto. Uh short introduction of who I am. I'm Raza, I'm the CEO at Scroll. Uh recently uh stepped up. Um this is going to be uh maybe a bit of a fun talk because the slides will tell a different story that I'm going to tell you. So, uh you can watch the slides or maybe listen to me, up to you.

Uh last year we launched a stablecoin, which honestly uh generally speaking, I'm not saying about our stablecoin, uh it shouldn't be called a stablecoin because what most yield-bearing stablecoins are are tokenized money market funds. Or they're just a financial instrument that, you know, the underlying assets are uh invested, there's a strategy, and that's, you know, what generates the yield. Um of course, we call it stablecoins to avoid like regulatory scrutiny, etc., etc.

Um and it's decentralized, so that means that, "Hey, it's out there. Use it if you want. Use it if you don't want If you don't want to use it, don't use it." But we had a we had a thesis where it was kind of like, "Mm, why is it that, you know, these yield-bearing assets um or these tokenized forms of a digital representation of a strategy was brought to in the form of a stablecoin? And I think that what was really cool is this was more of a way what is understood and communicated where people don't want exposure to crypto in a volatile way. And then what they got was exposure to crypto in a less volatile way. Even though, you know, we've seen it this year already a few times, unfortunately. I won't name

names, but stablecoins that either de-pegged or, you know, got hacked, etc. There's always risk involved, so it's not as, let's say, uh uh volatile or less volatile. Um but also, where is the yield coming from? Uh and so with a lot of decentralized stablecoins or DeFi stablecoins on chain, uh what I think is often not understood is the yield is all predicated on one single thing. The entire DeFi yield is predicated on one single thing. Does anyone know what I'm talking about?

Could you guess? If I had to ask you, "Where's the yield coming from?" One single place. And I will argue you argue with you. I will not let you leave the room. Where Where is Where does the yield come from? You, make a guess. No. Your government? No. No. Governments are losing money. Inflation. No, it's um borrow against. So, all the yield, everything, if you dial it down, panda, na na na na na, if you go all the way down, all the way down, the yield comes from borrow against. If no one borrow against, your USDC doesn't generate yield. So, all these vaults and more for all that stuff.

If If your asset is not provided as collateral and borrowed against, there's no yield. So, that tells you that it's a it's a zero-sum game. It's interesting, right? Because so if you look at like, you know, even if you look at like, again, not naming any any particular stablecoin, if you think about uh delta-neutral strategies and da da da da da, it's essentially longing and shorting and, you know, you're hedging. Um sure, that is more or less based on speculation, but even then, uh stablecoins in 2025, a lot of stablecoins came about and said like, "Oh, we we provide you 5% or 6% 7%." And then they had all these They all it was a circular economy, to say it nicely. To say it less nicely,

it's circle jerk. And at the end, if you provide your collateral and no one wants to borrow against it, no one's paying interest on it. If they're not paying interest on it, you know, the rates are low, the yield goes down. That's also like, why does the yield go up and down? Well when when investors or retail investors lose money, they get liquidated. What does that actually mean? Well, they provided collateral, borrowed against it, and their investment went down. So, they bought maybe I'm slowly going down. Like I don't care. Um and you know, they they lost money.

So, essentially like I bought a 100 coins worth $100. Suddenly it's worth $50. I get liquidated. Liquid liquidity vanished. But where did liquidity go? It's a zero-sum game. Um How do I go back? So, we did have a have a thesis, which is like, "What if you just have like one stablecoin and you get exposure to everything you kind of want to do with it?" So, if you want to spend it, which I think is a primary use case of uh of stablecoins, you know, uh I think USDT did a phenomenal job. Um I've I've I've been to Lagos. Uh and if you talk to I mean, it's cringe to say 2026, but it's true. Last year I was in Lagos, spoke with farmers. You We have Most people have no idea that you know, you hold the Nigerian naira and you lose

30% in a week. For a farmer and their margin and then the total is like it's it's it's outrageous. Like it's, you know, for for them it's a it's a game-changer. Um but uh and and and and even for uh businesses in Europe where we at Scroll are now going to focus on, you pay, let's say I'm I'm talking to this fiber optics company uh based in Paderborn in Germany, and you know, they do 25 million in revenue a year. They pay a few percent in banking fee. Well, if I can provide you a euro stablecoin, that's like 500K a year you save. Well, you know, that's a real use case, right?

Um so we were like, "Okay." And then, you know, at Scroll we're a ZK chain, so ZK's our bread and butter. We thought we can build a stablecoin that is you want to spend it, you can spend it. There's yield on it, DeFi yield, so speculative yield. You want to you can get it. Um we can make it private, so you send me money, I send you money. You don't you don't see the balances, which is like, you know, um was a primary concern. And then we make it gasless cuz we own the chain, so we can make it gasless, so taking that friction away. And we coined the term Neo Dollar. So, these were like sort of like all the It's still live, by the way. Um This These were sort of like um all the features that it had.

Um I still believe in that thesis, but I think that one of the the biggest unlock, which you won't read on the slides, was um RWA. So, I think that you know, what even yield-bearing stablecoins are, yield-bearing stablecoins are a form of RWA. Okay, so what is What is RWA? This is real-world asset. Um Is everyone familiar with RWA roughly? Heard about it? I'm familiar. Yeah? Yeah?

Are you familiar with RWA? Could you So, um it's a it's the you know, it's a typical crypto term where it's like RWA and real-world assets, and most people say yes, and they're they're actually in both. Like it's a very broad term. If someone Real-world assets essentially means what if in the real world where you have assets, buildings, currencies, anything, and you would put it on chain, that's called RWA, real-world asset that then comes on chain. The biggest problem with RWA was is that you would see uh you would see uh an announcement of like, I don't know, a Japanese building worth like, I don't know, half a billion dollars that came on chain.

And then we would all like, "Oh, half a billion dollars on chain." Absolutely useless. Because tokenizing assets are only useful when they're liquid. Okay, what's the primary use case of uh of of uh of of of owning assets? So, what's the primary use case? If you own property today, if you own gold today, you know, the cringe way of saying it is, "What do rich people do with it?"

To sell. No. Rich people never sell their assets. To grow. We I heard it. To grow. Grow? No, not grow. Borrow against. Borrow against it. That's what it is. It's borrow against it. You see what a rich people like, you know, what one of the richest persons did people did in the world when they wanted to buy a new company? You guys know it if I say it. It was Twitter. And he And that person, Elon Musk, bought Twitter how?

Did he sell his Tesla shares? No. He borrowed some from a bank. He went to He found people and said, "Listen, give me money, and I'll have my Tesla stock as collateral." Very important about real-world asset. So, what happened is he went and said, "Hey, you know, uh you, you have $100 million in the bank. I have Tesla assets. Don't want to sell them because they will be worth trillions one day." You're like, "That makes sense." So, I'm like, "Give me $100 million. In the case something happens, I'll sell them and give you your money back. But it won't. Give me your money." And you're like, "All right, I'll give you your money for 5% on it."

Um and then you're like, "Well, this asset that you gave as collateral has intrinsic value, so you gave me $100 million." And that's how he bought Twitter. That's why like, you know, uh this is famous comedian who he did a stand-up on it. He's like, you know, [clears throat] a billion-dollar transaction and, you know, he didn't have to like have any cash in the bank for it. So, now we come at the crux of it. So, you have assets. Rich people, what what do they do? They never sell it. They never sell it. They grow it by means of like up or down markets, they'll just buy more gold, they'll just buy more whatever.

And then the way they leverage it, so the way they extract value from it is to borrow against it. Okay. So, if you have a building on chain, how do you liquidate it? So, you see in that example, if I take $100 million from the gentleman and I have Tesla stocks, he knows in the case of like, you know, maybe I default on a payment, maybe like, you know, these shares are trending towards like $90 million before it happens, he can liquidate it and then I can pay. How do you liquidate a building? So, what was the unlock last year, which was oh, yield bearing stable coins are RWA, they're tokenized money market funds or tokenized strategies.

The The how do you put an an asset, a real world asset on chain? It's by means of tokenizing. Tokenizing means means you create an an ERC-20 on chain or you have other mechanisms. But then you need a custodial custodian off chain that makes sure that you know, when this value is like when I leverage it, I can liquidate the underlying assets to then like even it out. That's why Aave is so popular, right? Because it's permissionless. I provide ETH, I borrow USDC against it. If by some means like the you I let's say I have one ETH I provided, ETH 2K, let's say I borrow 2K, you can't, but let's say I borrow 2K, now ETH goes to like trends towards 1.9,

Aave sells my ETH to cover for that position, right? And then settles my debt at a penalty for me, right? So, that's like quote unquote automated because there's a liquid market for it. It's able to do this like a Uniswap pool, it can go like to Uniswap, swap it out. It pays off my debt, no bad debt. Like theoretically speaking right? You can't do that with a building. So, the So, the biggest unlock was um uh next slide has nothing to say with my Sorry, but like the biggest unlock was okay, RWA is real. Real world assets, tokenizing assets. And with the previous talk, FrankenCoin, essentially what you saw was the best use case for a stable coin.

So, uh I know FrankenCoin I I'm the host of Stable School podcast and I interviewed one of the members of the association. Um some of you were in the previous talk. Uh and what was said um I'm not sure if it was said is the reason for a Swiss franc stable coin was to have access to the tokenized securities on that market. That is a real use case. Because today, if you have tokenized securities and I ask you how do you buy them, you might be like, okay, with money, but how?

Like what buttons do you press? Where do you go? So, you see with the token with a stable coin, you know, an on on ramp point and you can go to a platform that they have and you can buy BOS shares with that stable coin because it's paired against that stable coin. So, stable coins are the gateway, the access. But um increasingly more so, I'm very very fond of uh fiat back stable coins uh that maintain their peg uh and I personally love um yield bearing stable coins because I come from the finance industry. I've I've had I've 10 years in banking and insurance and I think that it's really cool to see that tokenized financial instruments are here. Um and obviously for for very obvious reasons we don't uh call that tokenized

financial instruments because that um sort of like puts you in regulatory scrutiny. But the big Again, the biggest unlock was RWA. So, um as Scroll uh alluded to it as is that I think what is really really cool is tokenized securities, tokenized equity, uh and bringing real world assets on chain, but not quite I think what we see today in the news. So, uh and a very popular uh asset that comes on chain is uh gold. Have you guys heard of it? You must must like Do you know a very popular protocol that is doing that right now?

The huge They're tokenizing gold. You buy gold, it's in a Swiss bank. What's the gold? Yeah, XAUT. Uh they're not the first, but essentially um you buy gold um and uh there's like uh representation of that token of actual gold in uh a vault in a Swiss bank. How's that different from uh buying gold on paper? So, buying gold on Robinhood. There is a small difference cuz there is security guarantees guarantees are higher. Uh theoretically speaking, but I do I do believe like it is slightly different because it's here. But as far as an RWA asset goes, as long as the

asset is liquid, which XAUT is because it has DEX pools, like you can provide an on Aave, you can like provide it as collateral and then you can borrow against it, which again like is the primary thing you want to be able to do. Um then that's great. So, then you can like essentially, you know, leverage it. Um which by the way is the game changer in DeFi. The game changer in DeFi is borrow against because I'll tell you now um normal retail and there are like apps like Fidelity that allow now borrowing against was not really possible for retail.

It's a huge unlock. Normally, when you go to a hedge fund or an Like when you have a million Tesla stocks, you need someone, a broker or a bank that is willing to give you the loan. And those loans usually come at like a credit line and a and a high rate. So, Aave is really like an innovation where I was like, I don't need anyone's permission, I can drop it there, borrow against it, and then um you know, can you leverage? What most people also don't know, I'm I'm running on time, but is you like you're essentially trading at the point you're borrowing against because if I have one ETH and I borrow USDC against it, a thousand USDC, right? And then you guys have heard of looping and stuff like that. What am I

essentially doing? I'm longing ETH. When I have USDC and I borrow ETH against it, what am I doing? I'm shorting ETH. So, what most people don't know is it's like it's essentially trading. It's just like non-leveraged trading or less leveraged trading. Uh So, I think that you know, I think that the biggest unlock, so stable coins such as 2025 thing, um I think the biggest uh biggest quote unquote thing my I mean, prediction is as good as any's is RWA RWA, but not RWA as as we know it. Um so, we also have tokenized gold. However, it's different.

When you have that asset, you buy it at a discount. So, to me, blockchain I was introduced to it in uh I'll be quick, I'll promise. It blockchain I was introduced to it while I was doing accounting in a far far time ago. I was a ACCA qualified accountant in the UK. And I was taught about blockchain as like the I remember the teacher saying, I'm very old, uh saying uh um forget about this technology immediately, it's useless. And it was taught in university as supply chain. Like it's supply chain data. RWA has a huge value proposition because imagine if I could put gold on chain while it's being mined.

And then you get to have access to this at a market discount. So, now when you buy this token, what it represents is gold in let's say before like it's stamped or before the bars are formed. You get to have access to that like which you don't have access to today. Because you either need like a huge amount of capital, you you know, there's political risk, all that stuff. But what if you were to tokenize it and then the token would increase in value, so the yield would actually come from not speculation or borrowing against, but the yield would come from economic transactions that happen in the real world.

So, I think that RWA has huge potential. Um and I think that there's a lot to expand on and I think we've already been doing it, but we sort of like didn't know we didn't know. Uh and it's in a specific corner. Um but uh yeah, very much driven Personally, I'm very much driven by financial freedom. I think that the coolest thing about DeFi is again, rich people were doing this like for the longest time, borrowing against your asset. They never sell sold their gold. You guys probably heard this like when you buy it, so again, I'm a little bit older, but in 2010 when I first started my job, I was back to I then was like 20 years old. I bought property and then the That was 8 years of the markets just going up.

Every year year over year, so I would just re- remortgage my property, buy some more property, remortgage property. You know what remortgaging is? It's borrowing against. And so, you're only limited in your tools when you're like retail because I would love to have borrowed against when I just had $100 worth of assets because that would have made my wealth grow so much faster. So, I think DeFi is insane and the things that we're building is insane. Um and the possibilities that it gives because going from three figure, four figure, five figure net worth, six figure net worth is um it's important that you utilize all the tools and you have them like the infrastructure available.

Um and that's what I think everyone is building. Um and so, uh yeah, my main point to take away is like uh don't sleep on RWA. Uh if you don't know where the yield is coming from, you are the yield. Uh and uh yeah, if you want to talk about RWA or anything ZK, feel free to reach out. Thank you so much. You want to take questions? Uh hello, thanks for the talk. Uh so, maybe a very rookie question because I'm not that rich. Uh okay, so borrow against, yeah, sure, but at a certain time you repay, right? Like you need to pay off your debt. How do you do that

then or how does this thing accrue? Yeah. So like I'll say it now as non-financial advice, but so, the way So, the way we know how economies work is cycles up and down. I'll give you an example. Right now the S&P 500 is at its lowest in 7-year point of time. So, essentially if you you there's an ex- there's a general expectation that let's say S&P will go up. So, what you would do in this situation What I'm doing in this situation is I am um uh uh let's say borrowing against whatever whatever let's say stock I have and I'm buying S&P 500, right?

And then when it goes up, I sell a little bit to pay off the debt. And that's called rebalancing. So, in this act what usually quote unquote rich people do is that they will have So, let's say I'll do do bad case scenario. Bitcoin at 100k, you provided um uh you provide Bitcoin as collateral. I borrow USDC against it and buy more Bitcoin and then provide Bitcoin as collateral again. So, I'm essentially saying Bitcoin needs to go up because I have a debt of let's say 100k, right? Now, Bitcoin is going down. What usually people do is they won't borrow 100% against their Bitcoin, they'll borrow like 5% and another 5% and so it averages out until we hit like low in the market and I'll just keep it there.

Bonus, um if you never fully leverage it on the difference you make interest, which is the premises of that leverage strategy. And so, then what happens is bull market comes, boom. And then so, this happens like in a 3 4 5 6-month cycle, right? Now, Bitcoin goes like I don't know 120k or something like that. That's the moment you're like unwind. So, this is usually like done in cycles and you can do both ways. If you if you if you play both ways, you net out always you can net out like 12 15 30%. But, the repayment happens the moment you make a profit. How much of it?

Determines on your risk management and determines on how much you want to make. But, there's always risk involved. Like borrowing against is like sounds like a magic solution. It's not like a magic solution. Uh um is is just like uh you need to make sure you So, you can't do it with everything. You believe that the asset you're collateralizing has intrinsic value, number one. Uh number two, uh you play according to cycles. That's the TLDR. Usually stable coin usually equals low risk, right? When I see yields of 12%, imagine we're at a first-year econ class and they always tell you the higher the yield, the higher the risk. So, if

you're you're offering a product with very very low risk, how can you then offer a 12% yield within any um real-world business not real real estate real real real-world business would be considered extremely high? How would you answer that to a first-year economics student? So, I think risk is subjective. So, risk is really like um losing $100 is high risk to you when you have $100 in the bank account or losing $100 when you have a million is less. Um I also think that uh uh it's ironic that you say uh 12%. I don't I By the way, I agree with you what you're saying right now, but 12% when like I said, when I came up and about

2010, we're doing year over year like I don't know 20 30% for like 8 years. It was nuts. So, like is the those were the like I feel for young people. The way I explain it is is exactly the same way. Is that number one, in the stablecoin space we have a huge issue of ratings. There are no ratings. S&P is uh uh yeah. Not S&P 500, but S&P uh is trying to come up with something. Number two, that's exactly how I would explain it. The higher the risk the higher the yield, the higher the risk. Um and number three, you need to That's why I started the story my story with like you need to understand where the yield is coming from.

So, you So, even 12% no one is actually like when they say 12% or 50% it's usually up to cuz it fluctuates. Um and honestly, this not to deviate your question, the biggest risk to me when it comes to anything DeFi really and you saw it very recently again, I won't name their name, is when someone leaks their private keys. When there is a hack. That to me is like a much far bigger risk is like I might market I don't know 20 or 30%. The actual yield paid out is what really matters, that might be lower, right? But, one is like what does your underlying asset have exposure to?

Two is unfortunately with all things crypto, you're exposed to bigger risks that people are like not aware of. Does that answer your question? So, very high risk 12%. Yeah. Government bonds get 2% because you think you'll get your money back. You're willing to go to 12% if the risk is much higher, right? Well, I mean like I think oh man, it's no better no better be recording, but like when you say that like I think that's far more riskier because you net out you net out losing money because of inflation and you don't know it. So, >> [laughter] >> it's like when you talk about losing money, it's like man, you're losing money, you don't even know it. That's like the worst thing ever.

So, um yeah, like but I um I have I think the scariest thing of working in crypto is like you know, I have pager duty. That means that when that thing goes off, you know? Uh and I have four kids. So, it's um we're in the we're at the frontier. The The crazy way of saying is we're in the Wild Wild West, but I like to think we're in the front at the frontier. And I think it's what I think is really really cool is that this borrow against mechanism to be able to have provided that to like normal people um yeah, I think it's a is a huge unlock.

Baseline, I agree with you what you're saying is that there is a significant risk involved and people should educate themselves and be aware. Thank you guys. Thank you. Thank you. Appreciate it. Thank you.